Why Bellamy's Australia Ltd shares surged over 11% higher today

The Bellamy's Australia Ltd (ASX:BAL) share price has been on fire on Wednesday. Here's why…

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

It has been yet another positive day of trade for holders of Bellamy's Australia Ltd (ASX: BAL) shares.

In late morning trade the infant formula company's shares are up 10% to $15.76, having been up as much as 11.5% to $16.00 at one stage.

Why are they surging higher today?

With no news out of the company this morning, it appears investors have looked at the impressive A2 Milk Company Ltd (ASX: A2M) result as a sign of things to come when Bellamy's releases its results tomorrow.

This morning rival a2 Milk Company delivered total half-year revenue of NZ$434.7 million and half-year earnings before interest, tax, depreciation and amortisation (EBITDA) of NZ$143 million. This was an incredible 70% and 123% increase, respectively, on the prior corresponding period.

Once again, China was a key driver of this growth. Its China and Other Asia business recorded revenue growth of 204% to NZ$114.4 million and EBITDA growth of 252% to NZ$48.3 million.

This result was well ahead of the expectations of Goldman Sachs which I spoke about recently. Goldman had forecast sales of NZ$400.6 million and EBITDA of NZ$119.6 million.

Should you buy Bellamy's?

As I mentioned yesterday, the broker expects Bellamy's to deliver sales of $171 million and earnings before interest and tax of $34 million. This represents growth of 44% and 80%, respectively, on the prior corresponding period.

Whilst I think there's a strong chance that Bellamy's could outperform these expectations and even raise its full-year guidance again, I can't help but feel that its shares have now been priced for outperformance. Which could mean a significant sell-off if it fails to increase its guidance.

As a result, I think investors ought to resist the fear or missing out and wait for the Bellamy's release tomorrow before investing. If the result is merely in-line with prior expectations, investors may be presented with an opportunity to buy in at a more attractive price.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »